Focus is likely to be on renewing efforts to reduce over-dependence on Bretton Woods institutions.

Focus is likely to be on renewing efforts to reduce over-dependence on Bretton Woods institutions. (Reuters)

In the backdrop of the Greek referendum result sparking fresh concerns of yet another blip in the already fragile global economic recovery, the BRICS nations — India, Brazil, Russia, China and South Africa — are expected to set the ball rolling on a proposal to trade with each other in their local currencies. The move is likely to come as a booster to the economic engagement among five of the world’s biggest emerging countries amid renewed efforts to insulate themselves from over-dependence on Bretton Woods institutions and the hegemony of the US dollar.

Prime Minister Narendra Modi, who is leading the Indian delegation, is likely to have meetings with Chinese President Xi Jingping and Russian President Vladimir Putin during the course of the summit and his Pakistani counterpart Nawaz Sharif on the sidelines of the strategically important Shanghai Cooperation Organization summit that follows the BRICS summit in Ufa. India had formally applied for membership in SCO in September 2014. The SCO foreign ministers met in June in Moscow, and they had a positive recommendation regarding India’s membership to the Summit. India, alongside Pakistan, is likely to get the formal membership of the SCO at this year’s summit.

The seventh summit in Ufa, Russia on July 8-9 is also slated to build on two of the major initiatives that was formalised at their last meeting in Fortaleza – the launch of the New Development Bank that is being packaged as an “alternative” to the International Monetary Fund and the World Bank and set the ball rolling on the $100 billion Contingency Reserve Arrangement that each member can draw from in a financial crisis. On the anvil is also a proposal entailing special business visas for entrepreneurs from the five member states for easier travel among the countries of the grouping.

Modi will head for the summit after visits to Kazakhstan and Uzbekistan, which formed the first leg of an extended central Asia tour that will see him visit Turkmenistan, Kyrgyzstan and Tajikistan after the BRICS meetings in the eastern Russian city, some 1,300 km from Moscow.

“The Summit last year was productive and I am sure we will build on the ground covered during the last Summit. I expect positive outcomes in economic cooperation and cultural ties among the BRICS nations… India attaches high importance to BRICS. It is a great forum that can contribute effectively to mitigate global challenges,” Modi had said in a Facebook post before beginning his visit.

The theme of the Ufa summit is ‘BRICS Partnership – A powerful factor for global development’, with the agenda for the summit covering both political and economic issues, with indications that the overwhelming emphasis this time would be on the economic cooperation aspect. On the possibility of intra-BRICS trade in national currencies, the Central banks of all the five countries are learnt to have worked on drafting agreements.

Unlike the Bretton Woods institutions, the NDB will have equal contributions from all five member states, representing a departure from the former one and a new model for equality between participating members, with each of the five BRICS nations slated to contribute $10 billion each to the bank as seed money to start. The first president of the New Development Bank, former ICICI chief K V Kamath, is at the summit and has started the formal work on the launch.

Ahead of the summit, Russia on Tuesday convened a meeting of the finance ministers in Moscow, which was attended by finance minister Arun Jaitley. A trade ministers meet was also held. An Indian delegation official described the Ufa multilateral meeting of the BRICS and the BRICS outreach as a very important forum for “consolidating positions among five significant economies in the world on issues of common interest,” significant among them being issues of governance as well as of coordination and cooperation on global economic and financial issues. There are also indications that India could come under some pressure to open up its retail e-commerce sector to foreign investment, with Russia learnt to have pushed for a pact on e-commerce at the trade ministers’ meeting in Moscow on Tuesday.

On April 1, Russian president Vladimir Putin had announced that in addition to strengthening global security, the BRICS grouping would focus on the group’s Strategic Economic Partnership and will facilitate the launch of the New Development Bank and the Currency Reserve Pool.